Another Rubicon nears the crossing

Rubicon Japan Trust (RJT) has warned that, at present gearing levels, it has "little headroom" left in regard to deals it has arranged. But it has escaped the fate of its European twin, which has had to reopen talks with lenders about breaches of banking covenants.

Yesterday's disclosure follows similar announcements from Rubicon Europe and Rubicon America about lower valuations of their portfolios.

The Japanese trust told the ASX it is fast approaching the limits on its debt-to-asset ratios, after a revaluation of all of its 22 properties indicated their collective worth had ped by 14 per cent in yen terms since they were bought over a the period from September 2006. The loss of value is even bigger in Australian dollar terms - almost 18 per cent.

The properties were acquired for Y110,920 million and were worth Y115,534 million in RJT's books last December.

Since then the fund's debt and lending problems caused by the fallout from the global credit crisis have prompted a revaluation of the properties as part of a deal with its main lenders, Shinsei Bank, Credit Suisse and National Australia Bank, to bring its borrowings down.

Part of that deal involves the sale of key properties. The value of these assets has fallen to Y99,149 million ($963 million) - the figure that will be included in RJT's latest half-year accounts to the end of June. The fall in value is greater in Australian dollar terms - $211 million or 17.8 per cent - given the changes in exchange rates of the past six months.

The lower price tag on the properties has taken RJT within 4 percentage points of the 65 per cent hurdle in its banking covenants with Credit Suisse, and it is approaching the 70 per cent limit in its corporate facility deal with NAB. RJT said there was a risk over the next few months it could breach the arrangement with Credit Suisse, triggering a 30-day deadline for the trust to ensure it could continue to meet its loan obligations.

RJT's units fells 1.7c to 8.3c yesterday.